2009 (4) TMI 182 - HC - Income Tax

Whether, Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) whereby he directed the Assessing Officer to make adjustment of unutilized Modvat credit to the opening stock Held that in view of concession given by the departmental representative for directing the AO to take the closing stock of the previous year as opening stock of the next year, no question of law arise revenue s appeal dismissed

Summary

Issues: Valuation of inventory under section 145A of the Income-tax Act.

The judgment dealt with the substantial question of law regarding the valuation of inventory under section 145A of the Income-tax Act. The appellant raised a question on whether the Tribunal was justified in confirming the order directing the Assessing Officer to adjust unutilized Modvat credit to the opening stock. The Delhi High Court's decision in the case of CIT v. Mahavir Alluminium Ltd. was referenced, where it was held that a change in the closing stock must correspondingly adjust the opening stock to compute the true profit for assessment purposes. The judgment relied on the decision of the Privy Council in CIT v. Ahmedabad New Cotton Mills Co. Ltd., emphasizing the necessity of adjusting both valuation ends to reflect the true profit accurately.

The judgment highlighted the relevant observation from the Privy Council's decision in CIT v. Ahmedabad New Cotton Mills Co. Ltd., stating that failure to adjust both valuation ends would result in an inaccurate profit calculation. It emphasized the importance of reflecting the true profit by adjusting the stock valuation at both ends. The court agreed with the reasoning and finding of the Delhi High Court, supporting the adjustment of opening stock to maintain accurate profit computation.

Furthermore, the judgment noted a concession made by the Departmental representative during the Income-tax Appellate Tribunal proceedings. The representative had no objection to taking the closing stock of the previous year as the opening stock of the next year. This concession was duly recorded in the order. Based on these considerations, the court concluded that the question of law raised by the appellant did not arise and summarily dismissed the appeal.